In a previous post, we discussed the approval of the merger involving Exelon and Constellation Energy Group. However, it appears that the Maryland Public Service Commission has ordered Exelon to explain how the energy company violated several conditions of its planned merger with the Maryland-based company.
The Maryland PSC, which oversees all business sales and mergers within the state, recently gave its approval to the deal on the condition that the merging companies agree to several stipulations.
Exelon agreed to the PSC's request that it sell three of Constellation's Maryland plants in order to assuage concerns that the area's energy market could become overcrowded. The companies agreed to sell power from those plants at low cost until those sales could be made. However, Exelon recently informed the PSC that it sold power at prices higher than the agreed upon figures. Representatives from Exelon say the violation was committed "inadvertently" due to a problem with the company's computer software.
Following the admission, the PSC issued a "show cause" order, instructing Exelon to reveal the details of how the terms of the merger were violated. Exelon claimed that the improper bidding activity went on for about two weeks before it was noticed and corrected, but the PSC has demanded a more exhaustive account of the issue. It ordered the company to comply, suggesting that it could cancel the impending merger if a satisfactory answer is not received in time.
The Maryland PSC also ordered Exelon and Constellation to reveal how the violation may have harmed Maryland energy customers and develop a plan to remedy those infractions. Exelon must also demonstrate how they will prevent such violations from occurring in the future.
A representative with Exelon said the company is currently in the process of modifying its invoices "to ensure that we do not receive or retain any revenues that we shouldn't have received." Both parties to the merger will be allowed to file comments on the matter before the PSC holds a hearing to resolve the issue.
Source: Platts, "Maryland PSC to act on Exelon violation of merger conditions," Tom Tieman, April 13, 2012
Source: Baltimore Sun, "Md. Regulators order Exelon to explain merger agreement violations," Hannah Cho, April 13, 2012